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Who are User Entrepreneurs? Findings on Innovation, Founder Characteristics, and Firm Characteristics (The Kauffman Firm Survey)

Little is known about the paths individuals traverse prior to founding firms and the ramifications of these different paths on entrepreneurial outcomes. We investigate one particular path and its effects: user entrepreneurship. User entrepreneurship describes entrepreneurship by individuals who create innovative products or services because they need them for their own use and subsequently found firms to commercialize their innovations. A small number of industry-level studies suggest that many important innovative products and services are first introduced to the commercial marketplace by user entrepreneurs. Detailed data support this idea and describe user entrepreneurs and their firms. Specifically, we distinguish between three types of user-founded firms and contrast these firms with both the full sample of firms and firms engaged in R&D activities with respect to founder demographics, firm characteristics, and patterns of revenue growth, job creation, R&D investment, and intellectual property creation. In addition, we provide the first documentation of the prevalence of user entrepreneurship in the United States: 10.7 percent of all startups and 46.6 percent of innovative startups founded in the United States that survive to age five are founded by users.